8 Pricing Strategies for Your Digital Product
Have you ever thought of pricing as a powerful marketing strategy?
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Pricing can be used as a marketing strategy. For software-as-a-service (SaaS)-based businesses, this is especially true. Pricing can generate interest, drive sales and attract new customers to your list and business.
Related: 5 Strategies of 'Psychological Pricing'
If you never thought about using pricing as part of your marketing strategy and simply slapped your best guess onto the current price tag, take heart: The great thing about digital products is that you can always adjust their price. Better still, try testing each of these eight pricing strategies for your digital products, and see which one works best for you.
Here are pricing strategies for digital products that sell (Note: Although we often think of SaaS the way we do subscription-based software, such as subscriptions to Microsoft Office or a favorite virus protection tool, "SaaS" can also refer to other digital products with a recurring subscription-based model.)
1. Know the market, and price competitively.
Complete a competitive analysis and assessment so that you know how others in the industry are pricing similar digital products. Then, price yours to position it against the competition. If your product offers exclusivity, bonus content or a value-add that competitors' products do not include, consider pricing that's slightly higher or at least leverage the value-adds in your marketing messages. If your competitors offer similar products, consider how you can discount or incentivize with price without sacrificing your profit margins.
2. Offer tiered pricing.
Tiered pricing is common in the SaaS realm. Customers are already familiar with typical tiered pricing models, and you can offer varying levels of service, information or access to the features of your product at different price points.
3. Demonstrate the differences.
Many companies that offer tiered pricing demonstrate the differences between high- and low-end packages by using a grid or comparison chart. Salesforce.com is a great example. You can clearly see the enhanced value with each added tier in its comparison chart. Think about ways in which you can graphically show the added value of your product, using a tiered pricing strategy.
4. Let customers try before they buy.
Nearly every company offering SaaS lets customers try before they buy. Most companies offer a 7-day, 21-day or 30-day free trial. Be sure to have an autoresponder in place that will automatically contact customers whose free trials are expiring to remind them to renew before the trial ends. Consider adding a special offer to those who do renew before the trial ends to make it easy for customers to say "yes" and buy the full subscription package.
Related: Mastering the Art of Pricing: What the Textbooks Don't Teach You
5. Use psychological pricing methods.
Psychological pricing refers to a method of pricing items to make them appear like a bargain. Shop in a high-end store and you'll see that the items end in zero; shop at Wal-Mart or any typical discount store and note that prices end in "7" or "9." Consumers have been conditioned to see "value," even if an item is a penny less or two than a competing item. Instead of pricing your packages at $30, $60, and $90, consider pricing them at $29, $59, and $89 respectively, for example, to denote value.
6. Offer an added bonus.
Everyone loves a free gift with a purchase. That's why many digital products, such as ebooks, add a free ebook or worksheet to your purchase. It's an added, perceived value that can convince uncertain customers to complete the transaction. If you do offer an added bonus, be sure it adds substantial value to your core offering.
7. Offer a money-back guarantee.
Money-back guarantees take away the last objection to purchasing a digital subscription by removing the risk in the transaction. Customers leery of buying from an unknown or independent digital provider may be less cautious if they are certain their money is not at risk. If you offer a quality product, you should see few, if any, returns. And if you aren't certain about the quality of your product, take it back to the drawing board for additional tweaks; don't release it!
8. Test your offer and price, and be creative.
Pricing is important, but so too are the elements around the price on your website. The offer and creative elements work with pricing to attract customers to the page and convert browsers into buyers. Test different price points, new creative methods to showcase features and benefits of your products, new calls to action and added value or bonus products to see which combination converts the most leads to sales.
Related: 10 Pricing Strategies That Can Drastically Improve Sales
Pricing is an important element of your digital product strategy. By using these tips, you'll develop a realistic, profitable and attractive pricing structure for your digital subscriptions and more.